Decline of the Current Account Deficit of the Balance of Payments

The current account deficit of Croatia’s balance of payments in the first half of this year amounted to 1.66 billion euros, which is 319 million euros, or 16.1 percent less than in the same period last year, according to preliminary data from the Croatian National Bank.

According to HNB data, in the first quarter of this year, the current account deficit was 1.4 billion euros, while in the second quarter, a deficit of 254.9 million euros was recorded. On an annual basis, the deficit was reduced by 16.2 percent in the first quarter and by 15.6 percent in the second.

Movements in the current account are usually most influenced by developments in the goods account, where a decline was recorded in the first quarter and an increase in the deficit in the second, as well as movements in the services account, where a surplus growth was recorded in both quarters, primarily influenced by tourism.

The deficit in the goods account in the first half of the year amounted to 3.47 billion euros, which is an increase of 176.4 million euros, or 5.3 percent compared to the same period last year. This is a consequence of a stronger decline in goods exports than imports – revenues (exports) fell by 4.4 percent in the first six months to 4.45 billion euros, while expenditures (imports) recorded a slight decline of 0.4 percent to 7.93 billion euros.

In the services account, the surplus increased by 6.2 percent to 1.84 billion euros, primarily influenced by developments in the travel sub-account, i.e., tourism.

Good physical tourism indicators in the first six months have also reflected in the data on foreign exchange inflows from tourism, as travel income in the first half of this year increased by 4.9 percent to 2.08 billion euros. At the same time, travel expenditures decreased by 8.4 percent to 324 million euros.

A surplus increase was also recorded in the current transfers account in the first half of the year, rising by 5.8 percent to 606 million euros.

However, the deficit in the income account was significantly reduced by 35.9 percent. The deficit in the income account in the first six months amounts to 633.5 million euros, which is 355.8 million euros less than in the first half of last year.

HNB data on capital and financial transactions show that foreign direct investments in Croatia in the first six months amounted to 426.9 million euros, which is an increase of 7.4 percent compared to the same period last year.

According to this data, after strong growth in the first quarter, there was an outflow in the second quarter – in the first quarter, foreign direct investments amounted to 505.7 million euros, which was as much as 524.3 percent more than in the same period last year, but in the second quarter, a deficit of 78.8 million euros was recorded, compared to an inflow of 316.3 million euros in the second quarter of last year.